Personal Finance

CRA personal filing -interest accruing before the due date

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  • May 23rd, 2019 5:09 pm
[OP]
Sr. Member
Dec 12, 2010
774 posts
457 upvotes

CRA personal filing -interest accruing before the due date

I am not too familiar with the tax filing process as I usually let my accountant file for me.

So what happened is this:
I filed personal taxes on April 20th and I got my Notice of Assessment ready to view online on May 1st.
On the Notice of Assessment I owe the CRA lots of money and it say payment is due by May 21st. Fine with me.

I log in this week and I see that interest is already piling up and compounded daily.
I google and apparently I had to pay by April 30 or interests will be accrued.

I realize i done goof here, but why is the process so misleading?
I couldn't see my NOA until May 1st (1 day after my balance was due) and why would the NOA have a pay by date if it doesn't mean anything?
28 replies
Deal Addict
May 16, 2017
1561 posts
1967 upvotes
Either you or your accountant made major errors in reporting income if you "owe the CRA lots of money".

By law, you, the taxpayer are responsible for reporting your income and filing a complete return AND including payment for any taxes owing by the FILING due date. Any amounts owing will be subject to interest if paid after that date.

If you don't pay by the due date on the NoA, not only will interest continue to accrue but you can then also be assigned a PENALTY in addition.
Deal Expert
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Jul 30, 2007
28620 posts
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Toronto
The penalty is 5% of your 2018 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
Deal Addict
Jan 19, 2017
4139 posts
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chaugh wrote: I am not too familiar with the tax filing process as I usually let my accountant file for me.

So what happened is this:
I filed personal taxes on April 20th and I got my Notice of Assessment ready to view online on May 1st.
On the Notice of Assessment I owe the CRA lots of money and it say payment is due by May 21st. Fine with me.

I log in this week and I see that interest is already piling up and compounded daily.
I google and apparently I had to pay by April 30 or interests will be accrued.

I realize i done goof here, but why is the process so misleading?
I couldn't see my NOA until May 1st (1 day after my balance was due) and why would the NOA have a pay by date if it doesn't mean anything?
Usually the NOA will say 'to avoid additional interest charges please pay by such date.'. The NOA has already included interest charge from May 1 to the date the NOA was created.
In your case, the NOA would have included 1 day(May 1) interest already. But if you pay by May 21, then there will be no additional interest charge. Until May 21, there should be no daily interest charge.
When you said 'that interest is already piling up and compounded daily.'. I am assuming you see that in your Myacct. May be you had a balance carried over from last year that you didn't pay?
Deal Addict
Jan 19, 2017
4139 posts
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booblehead wrote: The penalty is 5% of your 2018 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
He filed before Apr. 30. So penalty doesn't apply.
Deal Addict
Jan 19, 2017
4139 posts
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robsaw wrote: Either you or your accountant made major errors in reporting income if you "owe the CRA lots of money".

By law, you, the taxpayer are responsible for reporting your income and filing a complete return AND including payment for any taxes owing by the FILING due date. Any amounts owing will be subject to interest if paid after that date.

If you don't pay by the due date on the NoA, not only will interest continue to accrue but you can then also be assigned a PENALTY in addition.
May be he has lots of investment or business incomes. Hence owe the CRA lots of money. That is normal.
Deal Fanatic
Mar 21, 2010
5489 posts
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Toronto
chaugh wrote: I realize i done goof here, but why is the process so misleading?
I couldn't see my NOA until May 1st (1 day after my balance was due) and why would the NOA have a pay by date if it doesn't mean anything?
It's similar to a loan/line of credit. Interest accrues from the date you owe the money, which is the date you have to file by and declare that you owe taxes. The due date is the date you have to pay by in order to not be in violation of the payment terms.
Deal Addict
May 16, 2017
1561 posts
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ml88888888 wrote: May be he has lots of investment or business incomes. Hence owe the CRA lots of money. That is normal.
IF you do your taxes correctly you include payment with the filing OR pay separately by the filing due date - you already know what you owe. A NoA merely is a confirmation or correction by the CRA, it isn't like a business sending you an invoice - your tax return includes your invoice.

You don't wait for you NoA to pay unless you like paying interest or you file really early so you have a chance of getting NoA before the filing due date.
Deal Addict
Jan 30, 2012
1548 posts
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TORONTO
OP, did you (or your accountant) read the T1 tax form?

On the last page of the T1 form (the page where you sign the tax return and certify that it is true), it says very clearly "Refund" or "Balance owing". Your accountant would have calculated which applies in your case.

Immediately below "Balance owing", it says, "Your payment is due no later than April 30".

Not sure how it can be more clear than that...
[OP]
Sr. Member
Dec 12, 2010
774 posts
457 upvotes
For some reason I thought I should wait for the NOA to come out to see exactly how much the CRA (and not the tax software) calculated I owed them. Welp, guess i know better now...
Deal Addict
Nov 26, 2011
2068 posts
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Ottawa
When you check balance online it would usually say its higher. However if you received a notice saying to pay by a certain date they would waive the interest for you.
Deal Addict
Jun 18, 2018
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Toronto
Honestly I would be in the same boat as you, but decided to pay what the tax software told me I would owe because either I would get a refund from CRA or I would owe more...

I just don't get why they have a May 21st payment on a NOA...
Deal Addict
Aug 30, 2011
3459 posts
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masoud100 wrote: When you check balance online it would usually say its higher. However if you received a notice saying to pay by a certain date they would waive the interest for you.
No.
Jr. Member
Mar 14, 2015
180 posts
61 upvotes
Montreal, QC
OttawaGardener wrote: No.
he's right, my account shows the daily interest coumponded. if you pay by the date on your NOA, no interest will be added even though they are still showing on my account. those will be waived if payment is made in time. the only interest to pay will be from april 30 to the date the noa is issued. i know because i work in collections at cra.
Deal Addict
Aug 30, 2011
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Ottawa
lamerveille wrote: he's right, my account shows the daily interest coumponded. if you pay by the date on your NOA, no interest will be added even though they are still showing on my account. those will be waived if payment is made in time. the only interest to pay will be from april 30 to the date the noa is issued. i know because i work in collections at cra.
His statement was ambiguous. Of course, no additional interest will be charged, but the original interest stands. Nothing is "waived" it simply isn't charged. Please clarify your statement with an example, as it is unclear if you are saying that the interest that was levied from April 30 to the date of payment will be waived.
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Feb 19, 2010
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OttawaGardener wrote: His statement was ambiguous. Of course, no additional interest will be charged, but the original interest stands. Nothing is "waived" it simply isn't charged. Please clarify your statement with an example, as it is unclear if you are saying that the interest that was levied from April 30 to the date of payment will be waived.
There is no way they're waiving the interest charged after April 30th to the date of payment.

To put it simply, pay the tax liability per your tax filing/software before April 30th and there will be no interest if the return is assessed as filed.

My return was filed on April 25th and my payment was processed on April 26th. My almost immediate NOA showed some interest charges and a date in May by which my payment needed to be processed before additional interest would be charged. Because my payment was made and processed by April 30th, the initial interest reflected on the NOA was reversed.

It does seem like a ridiculous way for them to do it but perhaps it's a function of trying to get NOAs out quickly and giving taxpayers additional time to pay (that will be subject to interest) notwithstanding the apparent confusion that it causes when people pay by April 30th.
Deal Addict
Feb 25, 2007
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Ottawa
As others have said, you are responsible for a) filing, and b) paying any balance owing by April 30.

Most people have confidence they, their accountant, and/or their software have calculated their tax correctly, and so there is no reason to do anything else than pay the calculated amount. Then you don't pay interest.
If there turns out to be an error on your return, money you owe or failed to pay will be assessed interest at a prescribed rate, which I think is currently 6%. (If the government turns out to have owed you money, they will pay you 4%). This seems pretty fair, in line with personal LOC rates and far less than other creditors (utilities, etc.) will assess on unpaid balances.

If you screw up, pay what's right (without further delay), and if there's little dribs and drabs of waived or additional interest it will eventually be calculated for you, and at the prescribed % rates above, won't break the bank.
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Jul 29, 2013
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Conquistador wrote: There is no way they're waiving the interest charged after April 30th to the date of payment.

To put it simply, pay the tax liability per your tax filing/software before April 30th and there will be no interest if the return is assessed as filed.

My return was filed on April 25th and my payment was processed on April 26th. My almost immediate NOA showed some interest charges and a date in May by which my payment needed to be processed before additional interest would be charged. Because my payment was made and processed by April 30th, the initial interest reflected on the NOA was reversed.

It does seem like a ridiculous way for them to do it but perhaps it's a function of trying to get NOAs out quickly and giving taxpayers additional time to pay (that will be subject to interest) notwithstanding the apparent confusion that it causes when people pay by April 30th.
I had the same thing happen. Filed April 27 and paid the same day. NOA came with no payment acknowledged. What a way to run a country!
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Nov 19, 2004
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profile wrote: I had the same thing happen. Filed April 27 and paid the same day. NOA came with no payment acknowledged. What a way to run a country!
Check your NOA and statement of account after the payment is processed and cleared (usually 1-2 weeks later) and it will show the payment received. The immediate NOA is prior to the payment clearing so it won't show the payment.

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